Tax relief for the rich means less job growth?

The Klingster claims that the Bush tax cuts were effective fiscal stimulus and that claims of their inefficiency are wrong. The real problem isn’t that consumers aren’t spending enough its that jobs aren’t being created. He goes on to say that the tax cuts are unrelated to the jobs gap problem.

The tax cuts are not boosting consumer spending because they couldn’t (you can only squeeze so much blood out of a turnip). On the other hand, we’re seeing growth. The only other destination for the extra cash is investment. If you’re not spending your additional money on even more big screen TVs and refrigerators, then you must be putting it in the bank (American or foreign).

It doesn’t appear that folks are investing abroad… quite the contrary:

The effect is a higher domestic investment, which means more machines and equipment for workers to man… More ovens in the proverbial kitchen.

But we’re not seeing the job growth that we’d expecting based on our experience in past business cycles:

What if past recoveries involved investment in more of the same machines, thus requiring more workers to man those new machines. What if, in this recovery, the extra money from the tax cuts is going towards machines and tools (e.g. computers) that are making current workers more efficient rather than more of the same tools for more workers (i.e. better ovens, not more)? That, in combination with the fact that consumers can’t spend anymore than they were already spending, would lead to a so-called jobless recovery… more investment, higher output, but no or few new jobs.


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